FSA fines Swinton Group £770,000 for PPI failings

28 October 2009 | By Natalie Thomas

Following discussions with the regulator, Swinton has also agreed to contact over 350,000 customers who paid for the PPI and offer a full refund.  

Between December 2006 and March 2008 the FSA found that the firm’s PPI sales process was flawed.  

The problems arose as a result of an “assumptive” selling technique in which PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover.  This resulted in unacceptable levels of non-compliant sales.

In addition, Swinton did not make it sufficiently clear that PPI was optional and did not properly disclose the cost of PPI at the point of sale.  

Firstly, the cost was bundled within the initial insurance quote and secondly, Swinton failed to disclose before the sale completed that the policy only cost £1.21 with the remainder of the £15/£20 charged being a fee taken by Swinton.

Swinton’s PPI customers will now be able to get a full refund.  Swinton will also pro-actively review previously rejected claims and pay compensation where appropriate. Swinton accrued approximately £7.8 million from its PPI sales.

Swinton exited the PPI market in March 2008 following a request from the FSA when these failings came to light.

Margaret Cole, FSA director of retail enforcement and financial crime, says: “These were deliberate breaches. Swinton was fully aware it should establish a customer’s need for PPI before recommending it, yet nearly half a million policies were sold to customers who didn’t necessarily require them.

“Swinton’s PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly.  

“This penalty, the remedial action, and Swinton’s departure from the PPI market - along with our recent announcement outlining the FSA’s tougher measures for regulating PPI – serve as a shot across the industry’s bow to remind it to play fair, or not play at all.”

By agreeing to settle at an early stage of the investigation Swinton qualified for a 30% reduction on the full fine; were it not for this discount, the FSA would have imposed a financial penalty of £1.1m.

In a statement Swinton says it takes the matter very seriously and will be contacting all customers concerned and the company apologises to any customer affected, and has set up a dedicated unit to deal with the PPI cases.

A statement from the company says: “The company did not deliberately set out to breach FSA rules or to disadvantage customers and acted in good faith in the development of its sales process which it believed was reasonable and proportionate for the low cost of the product. The total cost of the product was disclosed to customers and was in line with prices charged by other providers in the market for similar products.

“Swinton believes that the vast majority of its customers understood that the product was optional when offered to them and in fact, less than 50% of its eligible customers purchased the product.

“Swinton would also point out that the company itself initially brought issues with its sale of PPI to the attention of the FSA.

“In 2007, Swinton’s own monitoring identified that it had sold PPI to customers who may not have been eligible. Swinton informed the FSA of this issue and the FSA subsequently launched its investigation into Swinton’s sales process.

“Swinton proactively undertook a customer redress plan at this time writing to around 40,000 potentially ineligible customers reminding them of their purchase and offering a refund. Very few customers responded. Swinton believes that while there may have been breaches of the FSA requirements most customers were content with their decision to buy the policy. The company ceased all sales of PPI in March 2008.”

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